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January 5, 2023

As facts were not properly scrutinised by lower authorities, the matter was set aside by the ITAT

As facts were not properly scrutinised by lower authorities, the matter was set aside by the ITAT

Fact and Issue of the case

The assessee has argued that, in accordance with the Memorandum of Understanding (MOU) with M/s. Bombay MRI Pvt. Ltd (MRI company), the assessee was only monitoring and collecting MRI charges from patients at the Hospital in order to efficiently ensure supervision and control of the prices and prompt collections on behalf of the MRI company. It has been asserted that the set price that was intended to be paid to the assessee for providing such collection and supervision services was reduced after the MRI charges collected from the patients were reimbursed/paid to the MRI firm. The assessee claims that it was not required to deduct tax at source from the MRI charges it returned to the MRI company. It has therefore been urged that the question of levy of interest under Section 201(1A) of the Income Tax Act does not arise.

Observation of the court

We have heard both the parties on this issue and also perused the material placed before us. The main contention raised by the assessee before us is that, it is not required to withhold tax on the payments made to the MRI company since it is only acting as a collection agent on its behalf. The assessee states that, it is receiving fees from the patients who have availed MRI services from the MRI company and is handing it over back to the MRI company and therefore the question of deducting tax on the same does not arise. It is however noted from the order of the Ld. CIT(A) that, the assessee neither urged before him that the payments made to M/s Bombay MRI Pvt. Ltd. were not liable for deduction of tax at source nor was there any alternate contention raised before him that the payments were otherwise rightly subjected to Section 194C of the Act and that the provisions of Section 194J did not apply. This issue has thus not been examined by the Ld. CIT(A). Before us also, the assessee has only placed on record the MOU between the Hospital and the MRI company. No further details with regard to the collections made, corresponding payments to the MRI company, ledgers etc. has been provided which would substantiate their contention that these payments were collected/recovered on behalf of the MRI company and that the company did not retain any mark-up or profit therein (except their fixed fee of Rs.25 lacs). The assessee has also not placed copies of sample invoices and/or the copies of MRI reports issued to the patients which would substantiate its contention that the privity of contract was between the patients and the MRI company and not the patients and the assessee. For instance, whether the test reports are given by the MRI Centre directly to the patients referred to by the assessee hospital or are they issued to the assessee hospital by MRI Centre, who in turn issue the test results in their own letterheads.

It is thus noted that none of these aspects have been looked into by the lower authorities. Neither the assessee nor the lower authorities have been able to bring on record the correct facts as to the relationship between the assessee and the MRI company viz., whether it is a principal-agent or principal -principal relationship. Hence, the contentions raised by the assessee before us remains unsubstantiated and unverified. Upon query from the Bench, the Ld. AR had claimed that the MRI company had deducted taxes on the fees of Rs.25 lacs paid to the Hospital for the collection & supervisory services rendered by it, but no evidence in support thereof was placed before us. According to us, all these factors needs to be analyzed to decide about the nature of relationship and the relevant facts needs to be ascertained as to whether the payments were in the nature of reimbursements or not.


The ribunal ruled in favour of the assessee and ordered for fresh adjudication as none of the aspects and the relevant facts have been properly looked into and examined by the lower authorities

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